Jul 13, 2020

Commercial Rent Obligations During and Post COVID-19

By Don Catalano

Connect

Commercial Rent Obligations During and Post COVID-19
Around the world, millions of businesses have been affected by the COVID-19 pandemic and now business owners are concerned about their rent obligations. Many businesses have experienced a decline in their revenue, and a need to assess commercial rent obligations is essential.

 

Here are some commercial rent obligations for tenants before and after COVID-19:

 

1. Review Your Contract

The first step to take as a tenant is to review your tenancy agreement in order to have a complete understanding of your rights and obligations. First check the key terms of the lease: rent, term of the lease, clauses, and obligations of the landlord. It is important to get every detail right. For example, you may want to ask questions as regards rent:

  • When is the next payment date?
  • Is there a rent review? If so, when is the rent review date?

  • What is the lease termination date?

Make a note of these as they will be important when negotiating.

 

2. Force Majeure

The lockdown measure prevented many business activities from functioning, and it has impacted and still impacts the generation of revenue. Force majeure is a common clause in contracts that liberates tenants as well as landlords from liability or obligation when an extraordinary event or circumstance beyond the control of the parties prevents participants from fulfilling obligations.

 

You may have to discuss with your tenant rep or an attorney to know if the COVID-19 pandemic allows you to apply the force majeure in your tenancy lease. In case the landlord does not agree to whether COVID-19 constitutes a force majeure event, you may have to go to the court. The application of the force majeure is subjected to the interpretation governed by state law. To avoid the court hassles, you may want to negotiate with your landlord.

 

3. Right to Renegotiate the Lease

Currently, there is a 90-day moratorium on evictions in New York City. This means that tenants cannot be kicked out of their apartments. Nevertheless, tenants who fail to pay their rent for several months may be sued and taken to an eviction court case. Therefore, it is important for commercial tenants to be proactive about negotiations with their landlords. When negotiating with your landlord, you may want to ensure that you follow these guidelines:

 

  • Use an effective means of communication. Social distancing means you may not have a face-to-face conversation. You can have a video conference call or simply send an email. Regardless of the means of communication, do not procrastinate.

  • Be polite. The commercial building is also the landlord’s business, and everyone is affected. Use positive and empathic words.

  • Discuss the available payment plans that you have developed.

  • Agree to another date to discuss the rent payments moving forward.


4. Work with a Tenant Rep

Tenant reps have experience helping commercial tenants navigate situations like this. The world has experienced several setbacks like the hurricane. Experienced tenant reps have been able to help business owners find pragmatic ways to handle their lease obligations when revenues dropped and the future appeared bleak.

 

Here are a few other articles you might enjoy:

6 Ways to Increase Connectivity in the Office

The Beginner’s Guide to Commercial Real Estate Terms

Roadmap to Returning to Your Office Post-COVID-19

 

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Topics: covid-19

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Don Catalano

Don Catalano

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